Charity begins at home

Walterton & Elgin Community Homes, a non-charitable registered social landlord since 1991, has recently achieved charitable status while preserving the tenant majority on its board.

Walterton's activities have always essentially been charitable, but it was not originally permitted to register as a charity because a majority of its board members were tenants. Charitable status was the most appropriate for the organisation, so Walterton's board decided to apply for it, especially in light of the advantages associated with charitable status that would assist it in achieving its objectives.

Resident involvement remained of the utmost importance, however, and any solution had to reflect this. The board decided against the formation of a group structure, in favour of a direct approach to its regulators to permit the adoption of charitable rules.

The historic difficulty for resident-controlled registered social landlords wishing to become charitable stems from the legal principle that charities must be run for the benefit of the public, not for the benefit of their trustees. That principle led to a reluctance to permit too many beneficiaries, or users, to sit on the management committees of charitable RSLs. By the time Walterton was exploring its options, both the Charity Commission and the Housing Corporation had recognised that user involvement could in fact be valuable, but in their guidance still suggested that the number of tenant board members in charitable organisations should not exceed one-third. This guidance was reflected in the National Housing Federation model rules, and was sometimes wrongly assumed to reflect a strict rule of law.

A slight relaxation of approach was expressed in Guidance for Charitable Registered Social Landlords, a paper published jointly by the Housing Corporation and the Charity Commission in February 2002. This acknowledged that in principle a social landlord with a resident majority on its board can be a charity, and that the one-third rule was too restrictive for some RSLs.

The guidance emphasised the importance of robust procedures to deal with conflicts of interest, but contemplated the possibility of a charity operating with a tenant majority on its board.

Walterton's situation perfectly demonstrates the need for such a relaxation. Walterton exists to provide housing services to people in housing need.

Walterton’s situation perfectly demonstrates the need for a relaxation in the Charity Commission guidelines

As well as providing improved accommodation for those residents in occupation when it took a transfer of stock from Westminster council in April 1992, it also provides permanent new or refurbished accommodation to households nominated by the council, and temporary accommodation for statutorily homeless families. Its activities are, therefore, properly charitable.

At the same time, Walterton's history means that tenant involvement in the management of the organisation is viewed as crucial. The new rules, while based on the NHF model rules for a charitable RSL, continue to provide that any permanent resident of a home owned by Walterton is entitled to become a shareholder of the organisation, and that up to 14 of the maximum 20 board members will be shareholders.

The rules provide that a majority of both shareholders and board members must be permanent residents (or prospective tenants). They also enshrine extra regulations designed to prevent conflicts of interest. The Housing Corporation and the Financial Services Authority have accepted that these are adequate safeguards, and have now registered Walterton as a charity.

Walterton's chair, Jon Cotterell, says: "I'm very pleased that Walterton has achieved the status, which is wholly appropriate to its objects and adds to its financial strength.

"The support given to Walterton by the Housing Corporation was critical in achieving charitable status without any dilution of resident control."